Rate-Cut Optimism Evaporates as Equities Stumble

The equity markets faced significant headwinds today, with the S&P 500 dropping 0.90%, the Dow Jones Industrial Average sliding 1.06%, and the Nasdaq 100 retreating 1.17%. December S&P 500 E-mini futures fell 0.85%, while Nasdaq E-mini contracts lost 1.02%. This extended yesterday’s decline as investors grapple with the reality that Federal Reserve rate-cut expectations have been substantially undercut.

The Fed’s Hawkish Pivot Undermines Market Sentiment

Recent commentary from multiple Federal Reserve officials has effectively dampened enthusiasm for additional monetary easing. The probability of a rate cut at December’s FOMC meeting has plummeted to just 51%, down sharply from 70% a week prior. Fed policymakers have emphasized the economy’s underlying strength and persistent inflation concerns, signaling a more cautious approach to further reductions. This hawkish messaging has proven particularly damaging to sectors that benefited most from rate-cut expectations, including AI infrastructure and semiconductor equities.

Global Economic Concerns Add Pressure

The economic outlook darkened with disappointing data from China. Industrial production for October grew a mere 4.9% year-over-year, missing forecasts of 5.5% and marking the slowest pace in 14 months. More troubling, new home prices continued their downward trajectory, declining 0.45% month-over-month—the largest monthly drop in a year and the 29th consecutive month of contraction. This persistent weakness in China’s property sector raises questions about broader global growth momentum heading into year-end.

Cryptocurrency Markets Face Liquidation Pressure

Bitcoin’s momentum has evaporated alongside equity prices. The cryptocurrency trades near 87.69K with a 24-hour decline of 2.55%, sitting at its lowest levels in over six months. The broader selloff has been relentless, with Bitcoin down 24% from its recent peak, fueled by heavy liquidation activity. Bitcoin ETF flows tell a similar story—net outflows reached approximately 870 million on Thursday, the second-largest daily redemption since Bitcoin ETF trading commenced.

Fixed Income Benefits from Risk-Off Demand

Treasury securities staged a recovery as equity weakness sparked demand for safe-haven assets. December 10-year T-note futures gained 8 ticks, with yields declining 3.5 basis points to 4.084%. Initial weakness gave way to gains as investors rotated toward government debt. In Europe, bond markets moved in the opposite direction, with German bund yields rising to a five-week peak of 2.715%, while UK gilt yields climbed to 4.542%.

Mixed Signals from Corporate America

Despite today’s market turbulence, third-quarter earnings season has delivered broadly positive surprises. According to Bloomberg Intelligence, 82% of S&P 500 reporting companies beat consensus estimates, positioning this quarter for the best performance since 2021. Aggregate Q3 earnings expanded 14.6% year-over-year, substantially exceeding expectations of 7.2% growth.

Semiconductor Sector Under Siege

The chip industry faced particular pressure today, with Applied Materials leading losses down more than 5% after issuing a cautious outlook for first-quarter sales, projecting a 4% sequential decline. Other semiconductor heavyweights suffered comparable damage: Lam Research, Advanced Micro Devices, and Marvell Technology all retreated over 4%, while ARM Holdings, ASML, and Intel declined more than 3%. Foundational players including Broadcom, Analog Devices, and ON Semiconductor registered losses exceeding 2%.

Mega-Cap Technology Under Stress

The Magnificent Seven technology stocks collectively weighed on market performance. Tesla declined 2%, while Alphabet, Amazon, and Meta each fell more than 1%. Apple retreated 0.79%, Microsoft slipped 0.31%, and Nvidia was nearly flat at -0.05%. The dispersion in performance underscores growing concern about stretched valuations in AI-adjacent stocks.

Crypto-Exposed Equities Hit Hard

Cryptocurrency-linked stocks mirrored digital asset weakness. Coinbase Global, Galaxy Digital, Marathon Digital Holdings, Riot Platforms, and MicroStrategy each fell more than 3%, reflecting intensified pressure on the sector.

Notable Individual Movers

Stubhub Holdings plunged over 25% after reporting a larger-than-expected Q3 loss of $4.27 per share versus consensus of $2.49, alongside absent forward guidance. Bristol-Myers Squibb tumbled 4% after discontinuing its milvexian trial due to disappointing efficacy data. Manitowoc fell 3% following a Wells Fargo underweight initiation. Walmart declined 2% after announcing CEO John Furner will assume leadership effective February 1, 2026, succeeding Doug McMillon.

On the flip side, Cidara Therapeutics surged 104% following Merck’s agreement to acquire the company for $221.50 per share. Avadel Pharmaceuticals gained 20% on Lundbeck’s unsolicited acquisition approach at $23 per share. Warner Bros Discovery edged up 2% amid reports of acquisition interest from Paramount, Comcast, and Netflix. Shake Shack and Gap Inc. rose following analyst upgrades, while Nubank extended gains after Q3 revenue beat consensus estimates.

International Markets Post Losses

Weakness proved contagious across developed markets. The Euro Stoxx 50 declined 1.68%, China’s Shanghai Composite fell 0.97% from ten-year highs, and Japan’s Nikkei Stock Average closed 1.77% lower. The synchronized decline underscores growing concerns about synchronized economic slowdown and reduced rate-cut stimulus globally.